Not All Economists Agree

[sealybobo]

Can you show me one market that ever existed without being regulated by a government?

Any market that could ever exist without direct state regulation would likely be socialist in nature, as with Pierre-Joseph Proudhon's mutualist economy, for instance.

Since you guys won't read it:

The conservative mantra is "let the market decide." But there is no market independent of government, so what they're really saying is, "Stop corporations from defending workers and building a middle class, and let the corporations decide how much to pay for labor and how to trade." This is, at best, destructive to national and international economies, and, at worst, destructive to democracy itself.

Markets are a creation of government, just as corporations exist only by authorization of government. Governments set the rules of the market. And, since our government is of, by, and for We The People, those rules have historically been set to first maximize the public good resulting from people doing business.

If you want to play the game of business, we've said in the US since 1784 (when Tench Coxe got the first tariffs passed "to protect domestic industries") then you have to play in a way that both makes you money AND serves the public interest.

Which requires us to puncture the second balloon of popular belief. The "middle class" is not the natural result of freeing business to do whatever it wants, of "free and open markets," or of "free trade." The "middle class" is not a normal result of "free markets." Those policies will produce a small but powerful wealthy class, a small "middle" mercantilist class, and a huge and terrified worker class which have traditionally been called "serfs."

The middle class is a new invention of liberal democracies, the direct result of governments defining the rules of the game of business. It is, quite simply, an artifact of government regulation of markets and tax laws.

When government sets the rules of the game of business in such a way that working people must receive a living wage, labor has the power to organize into unions just as capital can organize into corporations, and domestic industries are protected from overseas competition, a middle class will emerge. When government gives up these functions, the middle class vanishes and we return to the Dickens-era "normal" form of totally free market conservative economics where the rich get richer while the working poor are kept in a constant state of fear and anxiety so the cost of their labor will always be cheap.

 

[Iriemon]

No, we don't need to cut any businesses down, we need to allow the free market to operate.

No thanks! I for one am not willing to live thru another great depression while we wait for the markets to operate.

We tried that strategy already.

Democracy - Not "The Free Market" - Will Save America's Middle Class

Wanted to get your feedback on this too.

I agree with much of it. I'm basically a "safety net" capitalist. I beleive Govt has a role to balance the economic engine of capitalism against providing nets for people who for various reasons fall thru the cracks.

I don't believe in Socialism. It fails because you need the profit incentive (and fear of failure too) to incentive people to be productive, take risks, create wealth. But while capitalism is a great engine of growth, it doesn't give a damn about people. People are only worth their market value. If you market value is -0- because you are sick or old or disabled, then capitalism could not care less if you starve. Capitalism is also short sighted and often is not that concerned with health education issues.

I think Govt social programs are necessary to balance out the ill effects of captialism, but providing at least basic sustenance for those who for whatever reason can't make it on their own. I don't fancy living in a society where the aged and disable are living under freeways. Govt IMO should provide that every child can obtain the highest level of education he or she can and is willing to obtain, and provide basic health care to its citizens.

Against that concern, however, the system cannot reward slothfulness. Otherwise many will not work.

It's a tough balancing act but you do the best you can.

I agree with the article that Govt's role is to regulate the markets to minimize anti social behavior of capitalism; pollution being the classic example. But Govt also has a role to see that businesses play fairly and don't become too big to fail.

I am generally a free trader. Some tend to look myopically only at the negatives of free trade and think in terms of jobs going overseas, and don't think about the millions of jobs that are created here because of trade, not to mention the better and cheaper products consumers can purchase.

 

[Agnapostate]

I don't believe in Socialism. It fails because you need the profit incentive (and fear of failure too) to incentive people to be productive, take risks, create wealth.

The assessment that socialism abandons incentive and the profit motive is not an accurate one. In reality, socialism can make several improvements in those regards that capitalism is incapable of providing. As I've mentioned here previously, the labor market is characterized by exchange and coercion, and a significant amount of the "incentive" that exists in the capitalist labor market is based on fear, which results in the paradox of inefficiency that I've mentioned previously, based on the work of Shapiro and Stiglitz in Equilibrium Unemployment as a Worker Discipline Device. Consider the abstract:

To induce its workers not to shirk, the firm attempts to pay more than the going wage; then, if a worker is caught shirking and is fired, he will pay a penalty. If it pays one firm to raise its wage, however, it will pay all firms to raise their wages. When they all raise their wages, the incentive not to shirk again disappears. But as all firms raise their wages, their demand for labor increases, and unemplyoment results. With unemployment, even if all firms pay the same wages, a worker has an incentive not to shirk. For, if he is fired, an individual will not immediately obtain another job. The equilibrium unemployment rate must be sufficiently high that it pays workers to work rather than to take the risk of being caught shirking.

This is the fundamental reason why full employment simply cannot exist under capitalism. If full employment were to exist, workers would lose the negative incentive against shirking, thus causing a condition conducive to internal firm inefficiency. Since involuntary unemployment is a wasted resource, of course, external inefficiency is thereby caused by a sufficiently high equilibrium unemployment rate. This therefore leads to a paradox of inefficiency in a capitalist economy.

Conversely, as noted by David Schweickart, "under economic democracy, this disciplinary stick is not required, since workers' basic motivation is positive. Everyone's income is a share of the firm's profits, so everyone is motivated to work efficiently-and to encourage co-workers to do likewise." This is what accounts for the superior efficiency levels observed in worker-owned enterprises and the even more democratic labor cooperatives. Worker-owned enterprises are also able to bypass Hayekian distributed and tacit knowledge problems, thus serving as an integral core of a viable socialist economy.

 

[Iriemon]

I don't believe in Socialism. It fails because you need the profit incentive (and fear of failure too) to incentive people to be productive, take risks, create wealth.

The assessment that socialism abandons incentive and the profit motive is not an accurate one. In reality, socialism can make several improvements in those regards that capitalism is incapable of providing. As I've mentioned here previously, the labor market is characterized by exchange and coercion, and a significant amount of the "incentive" that exists in the capitalist labor market is based on fear, which results in the paradox of inefficiency that I've mentioned previously, based on the work of Shapiro and Stiglitz in Equilibrium Unemployment as a Worker Discipline Device. Consider the abstract:

Let me just interject right here that it is not only (or arguably not the most important) characteristic of capitalism to incentivize by fear; but to incentivize by the potential of profit for success. That is what induces a person to invest their life's savings and work 16 hours days to build their own business or create that new product or service.

That is what socialism lacks.

To induce its workers not to shirk, the firm attempts to pay more than the going wage; then, if a worker is caught shirking and is fired, he will pay a penalty. If it pays one firm to raise its wage, however, it will pay all firms to raise their wages. When they all raise their wages, the incentive not to shirk again disappears. But as all firms raise their wages, their demand for labor increases, and unemplyoment results. With unemployment, even if all firms pay the same wages, a worker has an incentive not to shirk. For, if he is fired, an individual will not immediately obtain another job. The equilibrium unemployment rate must be sufficiently high that it pays workers to work rather than to take the risk of being caught shirking.

Is the premise of this statement accurate? Why would the firm pay more than the going wage to not shirk? Doesn't it pay more than the going way to reward industry?

This is the fundamental reason why full employment simply cannot exist under capitalism. If full employment were to exist, workers would lose the negative incentive against shirking, thus causing a condition conducive to internal firm inefficiency. Since involuntary unemployment is a wasted resource, of course, external inefficiency is thereby caused by a sufficiently high equilibrium unemployment rate. This therefore leads to a paradox of inefficiency in a capitalist economy.

Conversely, as noted by David Schweickart, "under economic democracy, this disciplinary stick is not required, since workers' basic motivation is positive. Everyone's income is a share of the firm's profits, so everyone is motivated to work efficiently-and to encourage co-workers to do likewise." This is what accounts for the superior efficiency levels observed in worker-owned enterprises and the even more democratic labor cooperatives. Worker-owned enterprises are also able to bypass Hayekian distributed and tacit knowledge problems, thus serving as an integral core of a viable socialist economy.

If everyone's income is a share of the profit, what induces me not to shirk sinces I'll still get a piece of the pie?

 

[Agnapostate]

Let me just interject right here that it is not only (or arguably not the most important) characteristic of capitalism to incentivize by fear; but to incentivize by the potential of profit for success. That is what induces a person to invest their life's savings and work 16 hours days to build their own business or create that new product or service.

That is what socialism lacks.

I never spoke of eliminating the entrepreneurial elements of capitalism. I suspect your assessment may be inaccurate in that it assumes that socialism is designed to ensure equality of outcome, and that its basis is a communitarian one rather than an egoist one designed to uphold the profit motive. However, I'm still of the opinion that cooperation can foster dynamic efficiency to a greater extent than competition (trade secrets are a simple and obvious example of the obstacles to cooperative innovation that exist in a capitalist economy), and that if we do have competitive enterprise, its efficiency is best maximized in a system of economic democracy.

Is the premise of this statement accurate? Why would the firm pay more than the going wage to not shirk? Doesn't it pay more than the going way to reward industry?

No. Due to the information asymmetries that exist in the labor market, employers may utilize efficiency wages to compensate for forms of agency problems that may occur, such as shirking, which is effectively a form of moral hazard.

If everyone's income is a share of the profit, what induces me not to shirk sinces I'll still get a piece of the pie?

Well, the lazy or incompetent certainly won't "get a piece of the pie," and their peers are certainly better equipped to identify them than a more distant manager.

 

[Iriemon]

Let me just interject right here that it is not only (or arguably not the most important) characteristic of capitalism to incentivize by fear; but to incentivize by the potential of profit for success. That is what induces a person to invest their life's savings and work 16 hours days to build their own business or create that new product or service.

That is what socialism lacks.

I never spoke of eliminating the entrepreneurial elements of capitalism. I suspect your assessment may be inaccurate in that it assumes that socialism is designed to ensure equality of outcome, and that its basis is a communitarian one rather than an egoist one designed to uphold the profit motive. However, I'm still of the opinion that cooperation can foster dynamic efficiency to a greater extent than competition (trade secrets are a simple and obvious example of the obstacles to cooperative innovation that exist in a capitalist economy), and that if we do have competitive enterprise, its efficiency is best maximized in a system of economic democracy.

I suppose we should first understand your definition of socialism, or whatever it is you are defending. I usually think of socialism as being common ownership of means of production; though the terms is used with many different meanings.

And I'm not sure you could have a system without competition, unless you are promoting a command economy structure? Please clarify.

Is the premise of this statement accurate? Why would the firm pay more than the going wage to not shirk? Doesn't it pay more than the going way to reward industry?

No. Due to the information asymmetries that exist in the labor market, employers may utilize efficiency wages to compensate for forms of agency problems that may occur, such as shirking, which is effectively a form of moral hazard.

You'll have to bear with me and please skip the economists' lingo and explain in layman's terms; it's been a couple decades since I took an econ class. I'm not sure what you are arguing here.

If everyone's income is a share of the profit, what induces me not to shirk sinces I'll still get a piece of the pie?

Well, the lazy or incompetent certainly won't "get a piece of the pie," and their peers are certainly better equipped to identify them than a more distant manager.

OK, I could see that. Though if you have a peer based system reward/punishment becomes more a factor of popularity doesn't it? Especially if the peers themselves are not subject to failure for looking past a less than industrious friend while perhaps they themselves are shirking.

And if there is punishment, I think you are back to the fear based incentive you were criticizing capitalism for. In a capitalist society if you don't produce you get fired. What's the difference with what you are proposing?

But mostly what I want to know is what induces entreprenuership in your system?

What is going to cause a person to invest their life savings and work 16 hours days to make a new business offering a new product or service grow, if they don't think they will make a profit from it?

 

[Agnapostate]

I suppose we should first understand your definition of socialism, or whatever it is you are defending. I usually think of socialism as being common ownership of means of production; though the terms is used with many different meanings.

Socialism is indeed the collective ownership of the means of production; such is both a necessary and sufficient condition for socialism. This emphasis on collectivism is also the basis for the socialist analysis of the USSR as state capitalist; ownership and managerial control was placed in the hands of the party elite and not any legitimate "collective."

And I'm not sure you could have a system without competition, unless you are promoting a command economy structure? Please clarify.

I don't necessarily object to competition per se; I'm actually of the opinion that economic democracy facilitates competitive market enterprise to a greater extent than capitalism does. Hence, I'm in agreement with Jaroslav Vanek's assessment that, "the capitalist economy is not a true market economy because in western capitalism, as in Soviet state capitalism, there is a tendency towards monopoly. Economic democracy tends toward a competitive market."

A socialist economic system without competition might be a more leftist libertarian socialist or anarchist one, such as the participatory economic system advocated by Michael Albert and Robin Hahnel, since it's based around the abolition of markets and establishment of direct participatory management of economic matters on a decentralized level.

You'll have to bear with me and please skip the economists' lingo and explain in layman's terms; it's been a couple decades since I took an econ class. I'm not sure what you are arguing here.

An efficiency wage is a wage paid above the market-clearing price in order to ensure efficiency, just as the name implies. One of the most common proposed justifications for this, as conceived in labor economics and supported by empirical evidence, is the elimination of shirking. For instance, we can refer to the analysis of Ewing and Payne in The trade-off between supervision and wages: evidence of efficiency wages from the NLSY.

Standard efficiency wage models suggest that workers employed in places with lower probabilities of identifying shirking will earn more, as will workers who have better alternative opportunities. This paper provides new empirical evidence in support of efficiency wage theory using the National Longitudinal Surveys of Youth data. The empirical results support the prediction of the model that workers employed in larger work groups are paid more, a finding consistent with a supervision--wage trade-off. Additional evidence supports the prediction that workers with better alternative opportunities earn more.

The efficiency wage hypothesis is an element of the agreement between both orthodox (Shapiro and Stiglitz) and radical (Bowles and Gintis) economics on this matter of the paradox of inefficiency in a capitalist economy.

OK, I could see that. Though if you have a peer based system reward/punishment becomes more a factor of popularity doesn't it? Especially if the peers themselves are not subject to failure for looking past a less than industrious friend while perhaps they themselves are shirking.

What's to stop the conventional capitalist manager from playing favorites? I'm of the opinion that democratic and transparent regulatory structure enables a firm to handle various tasks and management processes in a superior manner, and the empirical evidence bears out that assessment.

And if there is punishment, I think you are back to the fear based incentive you were criticizing capitalism for. In a capitalist society if you don't produce you get fired. What's the difference with what you are proposing?

The negative incentive is limited to the clearly incompetent or irresponsible, and the minimization of asymmetric information in a socialist economy enables them to be clearly identified, without the entire workforce fearing the wrath of a misinformed manager.

But mostly what I want to know is what induces entreprenuership in your system?

What is going to cause a person to invest their life savings and work 16 hours days to make a new business offering a new product or service grow, if they don't think they will make a profit from it?

There's no elimination of the profit motive involved. I think it's this assumption that characterizes the fundamental flaw in your analysis. In a market socialist economy, I don't envision entrepreneurial innovation being treated far differently than in a capitalist economy. As David Schweickart notes, a market socialist economy may retain "a quasi-capitalist sector comprised of small businesses and perhaps a sector of entrepreneurial capitalist firms."

In a participatory economy, wherein markets are abolished, Albert and Hahnel have proposed rewarding the innovative with social recognition. This at first sounds odd, until one considers that even the tremendously wealthy obviously have such a motive in mind; what other purpose can be served by excesses of luxuries and commodities than inflation of a sense of ego? This seems somewhat vague to me, and my own proposal is that a participatory economy reward the innovative with greater compensation shares (in a collectivist scheme), or reduced work hours or assignment of pleasurable tasks (in a communist scheme).

 

[Kevin_Kennedy]

No, markets are not the creation of governments. Markets can exist without government.

Wow, Thom took all that time to explain this to you and you come back with, "no they aren't".

Can you show me one market that ever existed without being regulated by a government?

That's all I need to come back with, because what Thom said was incorrect. Markets are neither created by governments nor do they require governments to operate.

 

[Agnapostate]

That's all I need to come back with, because what Thom said was incorrect. Markets are neither created by governments nor do they require governments to operate.

I've already explained to you why this is inaccurate in a capitalist economy through reference to the infant industry argument. If at all true that markets don't need conventional "government" to survive, this would be a reality only with a libertarian socialist economy. For instance, we could refer to Proudhon's mutualism.

 

[Iriemon]

I suppose we should first understand your definition of socialism, or whatever it is you are defending. I usually think of socialism as being common ownership of means of production; though the terms is used with many different meanings.

Socialism is indeed the collective ownership of the means of production; such is both a necessary and sufficient condition for socialism. This emphasis on collectivism is also the basis for the socialist analysis of the USSR as state capitalist; ownership and managerial control was placed in the hands of the party elite and not any legitimate "collective."

That happens when power is based upon political issues as opposed to market ones.

And I'm not sure you could have a system without competition, unless you are promoting a command economy structure? Please clarify.

I don't necessarily object to competition per se; I'm actually of the opinion that economic democracy facilitates competitive market enterprise to a greater extent than capitalism does. Hence, I'm in agreement with Jaroslav Vanek's assessment that, "the capitalist economy is not a true market economy because in western capitalism, as in Soviet state capitalism, there is a tendency towards monopoly. Economic democracy tends toward a competitive market." [/quote]

Why would there be no tend towards monopoly in a socialist system? That is the nature goal of profit maximizing competition.

A socialist economic system without competition might be a more leftist libertarian socialist or anarchist one, such as the participatory economic system advocated by Michael Albert and Robin Hahnel, since it's based around the abolition of markets and establishment of direct participatory management of economic matters on a decentralized level.

We'll then leave the command economy out of the discussion and discuss a competitive one.

An efficiency wage is a wage paid above the market-clearing price in order to ensure efficiency, just as the name implies. One of the most common proposed justifications for this, as conceived in labor economics and supported by empirical evidence, is the elimination of shirking. For instance, we can refer to the analysis of Ewing and Payne in The trade-off between supervision and wages: evidence of efficiency wages from the NLSY.

The efficiency wage hypothesis is an element of the agreement between both orthodox (Shapiro and Stiglitz) and radical (Bowles and Gintis) economics on this matter of the paradox of inefficiency in a capitalist economy.
[/quote]

I'm not sure I completely buy it, but its not germane to the main issue.

What's to stop the conventional capitalist manager from playing favorites?

Profit.

I'm of the opinion that democratic and transparent regulatory structure enables a firm to handle various tasks and management processes in a superior manner, and the empirical evidence bears out that assessment.

I could see it possible in certain situations.

And if there is punishment, I think you are back to the fear based incentive you were criticizing capitalism for. In a capitalist society if you don't produce you get fired. What's the difference with what you are proposing?

The negative incentive is limited to the clearly incompetent or irresponsible, and the minimization of asymmetric information in a socialist economy enables them to be clearly identified, without the entire workforce fearing the wrath of a misinformed manager.

I don't see the difference. Why would the entire workforce fear the wrath of a misinformed manager in a capitalist company than a socialist? Why would the socialist manager be better informed?

In the capitalist system, the manager has the incentive to be knowledgeable because the more productive his managed group is, the more he is rewarded.

What is the incentive for the manager to be knowleadgeable in the socialist system?

But mostly what I want to know is what induces entreprenuership in your system?

What is going to cause a person to invest their life savings and work 16 hours days to make a new business offering a new product or service grow, if they don't think they will make a profit from it?

There's no elimination of the profit motive involved. I think it's this assumption that characterizes the fundamental flaw in your analysis. In a market socialist economy, I don't envision entrepreneurial innovation being treated far differently than in a capitalist economy. As David Schweickart notes, a market socialist economy may retain "a quasi-capitalist sector comprised of small businesses and perhaps a sector of entrepreneurial capitalist firms."

I then don't understand your system at all.

I investment my life savings, blah blah, build up a company with 100 employees. Who owns it? Who gets the profit under you system?

If the company is commonly owned, the person who built it gets no greater profit than any other of the common owners.

So why the hell should he bust his ass and risk his assets to build it?

In a participatory economy, wherein markets are abolished, Albert and Hahnel have proposed rewarding the innovative with social recognition.

Who the hell cares about that. I'm not going to risk my life savings and work 16 hours days for social recognition. That is utopian BS.

This at first sounds odd, until one considers that even the tremendously wealthy obviously have such a motive in mind; what other purpose can be served by excesses of luxuries and commodities than inflation of a sense of ego?

That is I'm sure part of it, but they like the Bentleys, jets, yachts and servants too.

This seems somewhat vague to me, and my own proposal is that a participatory economy reward the innovative with greater compensation shares (in a collectivist scheme), or reduced work hours or assignment of pleasurable tasks (in a communist scheme).

The former is what the profit motive does; the latter does not incentivize risk taking and 16 hour days.

 

[Toro]

That's all I need to come back with, because what Thom said was incorrect. Markets are neither created by governments nor do they require governments to operate.

Markets do not require governments to operate but markets operate better when the government requires information and other facets that are not always available freely in the market.

 

[garyd]

But not nearly as much money as social progams...

 

[garyd]

Lot of silliness there and false assumptions bout human beings not the least of which is the idea that positive reinfocement which works fine for dogs of necessity works worth a damn for human beings.

 

[user_name_guest]

According to the Democrats, if 3 out of 10 people agree, then everyone agrees.

 

[Agnapostate]

That happens when power is based upon political issues as opposed to market ones.

Considering the nature of market/wealth concentration under capitalism, control of the means of production is consolidated into the hands of an elite few individuals though they can drastically alter the lives of the vast majority. Such a framework would accurately be described as heavily authoritarian if manifested through a state; as a fairly conventional anarchist, I merely extend this analysis to the private sector.

Why would there be no tend towards monopoly in a socialist system? That is the nature goal of profit maximizing competition.

For one thing, I don't favor the existence of markets. For another, a market socialist economy is not based around Darwinian "survival-of-the-fittest" competition, but on a scheme with greater relation to athletic competition, for instance. There's a deliberate intent for firms to remain small and subject to the improved efficiency of workers' ownership. As an anarchist, I'd personally decry the excessive centralization and hierarchy that often characterizes management in large firms.

We'll then leave the command economy out of the discussion and discuss a competitive one.

I don't believe the command economy should be relevant to any discussion of socialism, considering its fundamental contradiction of the participatory elements necessary in any legitimate establishment of "collective management."

I'm not sure I completely buy it, but its not germane to the main issue.

Labor economics is not sufficiently focused on; this is an unfortunate reality that should be changed.

Profit.

Utopianism. Considering the realities of asymmetric information in the labor market, matters are significantly more complicated. To be honest with you, this utopianism has clouded every exchange I've had with anti-socialists about the feasibility of efficiency maximization in a socialist economy, since they typically regard the capitalist economy as a "free market." I've seen that you're a supporter of liberal democratic capitalism rather than Anglo-Saxon capitalism, of course, but the mixed economy remains insufficient.

I've already noted the exchange between internal and external efficiency in a capitalist economy through reference to Shapiro and Stiglitz (since unemployment is a form of static inefficiency), but such trade-offs are not limited to such. For instance, we could refer to capitalism's tendency to impose a similar trade-off between static and dynamic efficiency. As noted by Jon Elster and Karl Ove Moene:

Two well-known examples of the trade-off between static and dynamic efficiency are the patent system and the role of the entrepreneur. The paradox of the patent system is that by slowing down the diffusion of knowledge it ensures that there is more knowledge to diffuse. The paradox of the entrepreneur stems from his identification with the firm (his role as the 'residual claimaint'). On the one hand, the intensity of his search for new methods and markets will be greater than that of a salaried manager; on the other hand, his criteria for accepting or rejecting the outcome of the search will be inefficient, because of his risk aversion.

Similar commentary on the irrelevance of a utopian conception of capitalism when commenting on matters of dynamic efficiency is provided by Robin Hahnel.

Nor do I see why critics worry there would be insufficient incentives for enterprises to seek and implement innovations, unless they measure a participatory economy against a mythical and misleading image of capitalism. Sometimes it is presumed that innovating capitalist enterprises capture the full benefit of their successes, while it is also assumed that innovations spread instantaneously to all enterprises in an industry. When made explicit it is obvious that these assumptions are contradictory. Yet only if both assumptions hold can one conclude that capitalism provides maximum material stimulus to innovation and achieves technological efficiency throughout the economy. In reality innovatinve capitalist enterprises temporarily capture "super profits" which are competed away more or less rapidly depending on a host of circumstances, including patent laws and the efficacy of enforcement of intellectual property rights. This means that in reality there is a trade-off in capitalist economies between stimulus to innovation and the rapid spread of innovations, or a trade-off between dynamic and static efficiency.

Utopianism was also the basis behind the socialist economic calculation debate, which centered around whether the central planner could mimic the Walrasian auctioneer. The reality of the nonexistence of the latter was never addressed, and a mythical and unrealistic depiction of capitalism was thus portrayed. This state of affairs obviously cries out for a remedy.

I could see it possible in certain situations.

There's an almost unprecedented amount of support for the reality of the superior efficiency of workers' ownership and management in the empirical literature.

I don't see the difference. Why would the entire workforce fear the wrath of a misinformed manager in a capitalist company than a socialist? Why would the socialist manager be better informed?

In the capitalist system, the manager has the incentive to be knowledgeable because the more productive his managed group is, the more he is rewarded.

What is the incentive for the manager to be knowleadgeable in the socialist system?

There's no such "socialist manager" in a participatory economy due to the elimination of the coordinator class. Full autogestion (workers' self-management) can be implemented through direct democratic management of the workplace. The elimination of the financial and coordinator classes and establishment of collective ownership, management, and work thus also eliminates the principal-agent problem. Frankly, the reality of full employment being able to exist in a socialist economy because of the establishment of more "positive" incentives (carrots rather than sticks), is a fundamental component of its improved efficiency.

I then don't understand your system at all.

I investment my life savings, blah blah, build up a company with 100 employees. Who owns it? Who gets the profit under you system?

If the company is commonly owned, the person who built it gets no greater profit than any other of the common owners.

So why the hell should he bust his ass and risk his assets to build it?

For one thing, that's obviously not a widespread reality in the capitalist economy. We can illustrate this through consultation of the empirical literature, namely Summers and Kotlikoff's The Role of Intergenerational Transfers in Aggregate Capital Accumulation. Consider the abstract:

This paper uses historicaI U.S. data to directly estimate the contribution of intergenerational transfers to aggregate capital accumulation. The evidence presented indicates that intergenerational transfers account for the vast majority of aggregate U.S. capital formation; only a negligible fraction of actual capital accumulation can be traced u, life-cycle or "hump" savings.

Honestly, the existence of a class whose mere purpose it is to "supply capital" is unnecessary. Financial assets would be more efficiently and rationally managed in a democratic manner.

Who the hell cares about that. I'm not going to risk my life savings and work 16 hours days for social recognition. That is utopian BS.

Considering that no system of "social recognition" has yet been implemented, I'd not be so quick to judge. That said, it's not tangible enough for me to personally advocate, at least not yet.

That is I'm sure part of it, but they like the Bentleys, jets, yachts and servants too.

It would have been more accurate to ask why they have an interest in wealth accumulation far beyond the amount that they could ever spend.

The former is what the profit motive does;

I'm aware of that. Though the profit motive has promoted inefficiency under capitalism, the opposite is true in a socialist economy.

the latter does not incentivize risk taking and 16 hour days.

Balanced job complexes are a necessary component of incentive creation in a collectivist or communist economy, and reductions in work hours can be a component of that balance. As for "risk taking," is this merely another reference to the activity of the financial class?

 

[Oddball]

Plus, Peter Schiff is spectacularly wrong about the dollar.

It has bottomed relative to other fiat currencies.

So far......But the printing presses haven't even warmed up yet.

 

[Agnapostate]

So far......But the printing presses haven't even warmed up yet.

Do you regard Schiff as a deity, then? Heterodox economics centers around predictions of the failure of actually existing capitalism. I could easily point you to a socialist economist who predicted crisis long before Schiff.

 

[Oddball]

Do you regard Schiff as a deity, then? Heterodox economics centers around predictions of the failure of actually existing capitalism. I could easily point you to a socialist economist who predicted crisis long before Schiff.

Absolutely not...I see no man as any kind of deity....Which, unfortunately, cannot be said for the adherents to Keynesian voodoo and its witch doctors, like Krugman.

 

[Agnapostate]

Absolutely not...I see no man as any kind of deity....Which, unfortunately, cannot be said for the adherents to Keynesian voodoo and its witch doctors, like Krugman.

Krugman's neo-Keynesianism marks a significant divergence from the pure Keynesian thesis. The incorporation of the IS/LM model (originally introduced by Hicks and developed further by Modigliani, though Hicks was opposed to the nature of its utilization by the neo-Keynesians), and the later incorporations of the Phillips curve and the Mundell-Fleming model created a reliance on neoclassical economics that rendered neo-Keynesianism far more orthodox than anything else. Even Krugman's own "new trade theory" is fundamentally based on upholding trade liberalization, just as Keynesianism in general is fundamentally based on upholding capitalism, contrary to the misinformeds belief of ignorant anti-socialists.

 

[Seraega]

This just goes to show that you can find nuts in any field to agree with whatever position is popular with their politics of choice.